If I am not mistaken, most of the top business schools (even at public universities such as UVA) have their own endowments and are tied to the parent university pretty much in name only. My thought is that the cost burdens of increasing the size of a bschool class (bigger class rooms, more professors, etc) are far greater than the revenue gain of adding 10% to a class. The quantitative dork side in me wants to build a spreadsheet model to validate this claim, but, no time this morning.

My guess is that the schools that increased class sizes this year, did it more in response to the mass downturn in the professional job market and the expected increase in application volume.

As far as admissions criteria loosening, again, I don't see that happening either, even if schools where to expand. Lets say a school like Kellogg was to expand by 10% (I would seriously doubt any top business school would have the capacity to grow in 1 year much more than that). That would add another 65 students or so. My guess is that in 6000+ applications, there are at least 65 applicants that look better on paper (GMAT, GPA, pre-MBA salary, etc) that got the ol' ding for not other reason than they come from an over represented population (MC/IB).

Now, assuming my first counter argument is not true, and easing admissions criteria would "lower the bar" for entry, the other reason easing entry requirements is counter productive to endowment grow has to do with the product that bschools produce. Firms like Bain, JP Morgan, Google, etc, sponsor tons of events at the top bschools. This proves to be a symbiotic relationship. The bschool gets to save on operating costs by having a company foot the bill for an event/program, and the company gets to have its name thrown out in front of a world class business program. If all of a sudden there is a perceived notion that bschool X has lowered its admissions criteria, then there is also a chance that companies will not be as willing to support the school as much thinking that perhaps the students are not a good as they used to be.

Either way, my guess is that the investment managers for bschool endowments are not recommending to the deans of top 10 business schools to increase their class sizes for the sake of the endowment. Keep in mind, HBS' endowment is over $1b and most of the other top 5 are close to $500 mil. a one year 20-30% decrease is not going to bankrupt any of these schools.